David White, the director of Katoomba RSL, said requiring such security was a "mitigation action ... beyond our means".

As a result, the decision was made to cancel marches in Katoomba, Blackheath, Springwood and Glenbrook.

"The terrorists are winning. I say that because the reaction to events overseas continue to provoke over-reactions here," Mr White said.

"We are devastated that we have had to take this action because it's such a long, unbroken tradition and something which we believe is cherished by the local communities.

"It's that loss of something which has been treasured by the community which breaks our hearts."

Mr White said there will still be dawn services and wreath-laying ceremonies. There will also be a march in Lawson, which has been privately-funded.

The four sub-branches have appealed to the state government to ease the traffic obligations or to help with costs, without success.

Blue Mountains Council, which is believed to have spent $70,000 over the past two years to ensure the marches went ahead, is unable to continue the financial assistance this year.

On Wednesday night, NSW Police Assistant Commissioner Denis Clifford said he was "extremely disappointed" to hear of the cancellation.

Mr Clifford, who is the Commander of the North West Metropolitan Region, said he would work to ensure the ceremonies went ahead.

"I understand the concerns about the environment we currently live in, but I would like to assure all the veterans, their relatives and concerned members of the public that we are not aware of any specific threat to ANZAC Day Marches," Mr Clifford said.

"As such, I've called for a meeting early next week with all parties involved in organising the Blue Mountains marches to attempt to resolve the situation and ensure this important day of commemoration is not affected.

"Anzac Day is a solemn occasion and a time when we respectfully pay tribute to the ultimate sacrifice that was made by our Diggers."